Contractors reeling at latest building products price hikes

Grant Prior 1 year ago
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Contractors are facing months of more building products price rises despite a drop in raw material and energy costs.

Plasterboard manufacturers have been the first to act in the New Year with major manufacturers increasing prices by up to 17% while insulation materials are set to rise by around 10%.

Data compiled by building products distribution giant SIG shows a series of other rises planned over the coming months including 10% hikes in roofing tiles.

One contractor said: “The situation is getting ridiculous now with price rise after price rise.

“Last year it was obvious that costs were going up for manufacturers but that seems to be easing while price rises are still gunning ahead.”

Construction Products Association Economics Director Noble Francis said: “The spike in energy prices, oil prices and commodity prices were all in Spring 2022 after Russia’s invasion of Ukraine.

“However, many manufacturers are on fixed forwards contracts for energy so the full impact of the initial energy price rises is phased over time so some manufacturers were coming off energy contracts signed a couple of years ago in Autumn, which meant a sharp rise in energy costs even though energy spot prices fell in Autumn (from a high point) and these energy cost rises have to feed through to construction product prices.

“This is particularly the case for energy-intensive construction products where demand remains strong and where energy costs account for around one-third of total costs. As a result, many manufacturers will have had to pencil in price rises in December and January.”

The Construction Leadership Council’s latest construction product availability statement last month said: “Price inflation for products has slightly moderated across the board this month, but looking ahead, rising energy and wage costs are expected to put significant upward pressure on prices in the New Year.

“In particular, manufacturers of energy-intensive products (such as bricks, cement, glass, insulation and plasterboard) warn that although many have been able to hedge energy costs through Q1 of 2023, energy prices in Q2 and Q3 are expected to be considerably above historical (pre-Ukraine war) levels without further Government support.

“Against this, a gradual slowing of demand for construction products across most sub-sectors over the last three months of 2022 has helped ease the pressures on product supply.

“Most industry forecasts project further declines in demand in 2023 although some sub-sectors will fare better than others. With less strain on the supply chain, general product availability should have an opportunity to recover further.”

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